The New Europe
At a recent conference, Dick Kramlich, a VC at New Enterprise Associates, was asked about investing in Europe. "Europe is a nice place to visit," he replied. That's the attitude of a lot of U.S. VCs. Seems you have to live and work in Europe to really get it. Danny Rimer, a VC at Index Ventures, has been over there for several years now (he's based in London but flies all over the continent). I spoke with him this week. He says the hottest up-and-coming region right now is Eastern Europe.
Index hasn't yet invested in any Eastern European startups, though it's in hot and heavy negotiations with two of them (Rimer wouldn't name them, natch). Since the fall of the Berlin Wall, the region hasn't belched forth a bevy of high-tech entrepreneurs, but it has produced a lot of engineering talent, which has been tapped long-distance by U.S. and Western European companies.
Two companies in Index's portfolio use Eastern European coders: Skype, the Luxembourg-based voice-over-Internet company, has an engineering center in Estonia; and MySQL, the Swedish database company, has engineers scattered throughout Eastern Europe. These kinds of companies serve as training grounds for future Eastern European entrepreneurs. "First you have engineers that work at a company a few years, and then they strike out on their own," Rimer says.
Index has been looking closely at Russia, Estonia, and Hungary. Estonia is particularly rich in WiFi and wireless engineers because of measures the Estonian government has taken to make WiFi freely available. However, most Eastern European countries are short on experienced management. That's where a good VC firm can come in handy by offering advice and helping recruit executives from the West. Look for some interesting startups to emerge from behind the fallen iron curtain.
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